Canada needed Ted Kennedy

I was disappointed to see a dearth of eulogies praising Ted Kennedy's laudable work in helping to push through airline deregulation in the US under Carter.

Today's National Post tells me something I didn't know before: intercity buses in Canada are under the same kind of ridiculous regulatory regime that stifled the US airline industry pre-deregulation. In short, dominant carriers get protected access to more profitable routes coupled with mandated service on loss-making routes. So folks busing between big cities cross-subsidize folks going from Winnipeg to Manitoba's far north. And now Greyhound has pulled out of the entire deal as the package was no longer profitable.

Ugh. If there's some compelling social interest in providing subsidized busing to remote areas, the government would do much better by simply paying a per-ticket subsidy to any operator running the route and allowing free entry into service provision on all routes. It's hard to see why it makes more sense to force relatively poor folks taking the bus from Winnipeg to Calgary to foot the bill for the even poorer folks taking the bus from Winnipeg to Terrace Bay than for the subsidy to come from the general tax take. The deadweight losses from cartelization of the main routes have to be large.

It's also thoroughly unclear why mucking about in prices is preferable to just using the second welfare theorem: charge market prices for everything but give poor people more money and let them decide whether to live in the middle of nowhere or not. But that's perhaps a bigger policy shift than Canada would be comfortable with. At minimum they ought to shift from route cross-subsidisation to direct subsidisation of otherwise underserviced routes.

Even Ted Kennedy knew that the cross-subsidisation system was a nonsense (though it helped that he was from Boston, one of the bigger providers of cross-subsidies to other places). Perhaps Canada will catch on someday too.